Deemed Ownership in India: The 2022 Rule That Should Have Fixed RC Transfer (and Why It Hasn't)
In the last essay I argued that selling a car in India does not end your liability — it stays with your name on the registration certificate, and that name can take years to change, or never change at all. One in five sold cars still carries the seller's name.
Here is the part that makes it frustrating rather than plainly sad. India already wrote the fix. Three and a half years ago.
On 22 December 2022, the Ministry of Road Transport and Highways (MoRTH) notified some amendments to the Central Motor Vehicle Rules, 1989 (CMVR) vide G.S.R. 901(E) — that created the “deemed owner” framework. The underlying idea was elegant and correct: as used-car dealers facilitate an ever increasing share of used-car transactions, they must become a structural part of the transfer process. And, when you sell your car to such an authorised used-car dealer, that dealer becomes the “deemed owner” of the vehicle the moment you hand it over. Your liability ends right there. Not when some distant clerk finally updates the database — right there, at handover. The party who has taken possession of the car carries the responsibility for the car, until the car is sold to the next owner/buyer. That is how it should always have worked.
On paper, the problem I described in the last essay was solved at the end of 2022. So why is it still everywhere? A big part of the reason is that in India, while Central Government legislation developed by MoRTH (MVA, CMVR etc.) control the technical and standard-setting layer: RC transfer rules, the form and content of licences and RCs, and the national digital backbone (Vahan, Sarathi, the National Register etc., states / state-level Rules control the implementation and field layer: the actual registration of vehicles through RTOs, issuance of driving licences, fitness certification, NOCs, hypothecation etc.
The practical friction you'll recognise from your experience of selling your car or buying a used one lives exactly at the seams of centrally prescribed forms and procedures executed discretionarily by states. RC transfer is not the only victim here, BH-series adoption and road-tax calculation and refunds are just a few more such examples - but I digress.
How many Indian states have implemented the deemed ownership framework?
Start with the cleanest measure of the gap. The framework has existed in national law since December 2022. Three and a half years later, fewer than two-thirds of India's states and union territories have so much as enabled authorised-dealer registration on the VAHAN portal. The rest have not switched it on. Before we even ask how well the framework works, more than a third of the country's states and territories have not started. The law is simply not available to a citizen selling a car there and you will be surprised to see just how few of us make the cut here!
Now look at where it is switched on, because "enabled" turns out to be a low bar. We operate in nearly every major state, and we have watched the same pattern repeat: a state flips the switch on VAHAN, and the ground beneath it does not move. RTOs that have never processed an authorised used-car dealer registration. Officials reading the dealer's powers differently from the RTO next door. Processes that still demand paper and physical presence for a framework that was meant to be digital. Enabled on the portal, absent in practice. The rule exists nationally. The working version of it exists almost nowhere.
The adoption numbers say the same thing from the dealer's side. Fewer than 1,900 dealers have registered as authorised dealers across the country, according to VAHAN registration data cited in the industry's submissions to MoRTH and corroborated by independent reporting in Business Today. Set that against an estimated 30,000 to 40,000 used-car dealers operating nationwide, and the adoption rate is roughly 5 to 6% of the market. A reform that one dealer in twenty has taken up is not a functioning reform. It is a well-intentioned rough draft sitting in a government gazette notification.
I do not say this to score a point against the government. The intent behind G.S.R. 901(E) was genuinely progressive. It diagnosed the problem correctly and proposed the right mechanism. The failure is not in the design. It is in the gap between a central rule and state-level execution, which is where a remarkable amount of Indian reforms go to die.
Does RC transfer work the same way in every Indian state?
Sell the same car in two different states and the experience of it — how long it takes, how many physical visits it demands, whether your liability actually transfers, whether anyone is accountable if it goes wrong — depends almost entirely on which state's RTO registered your vehicle. We operate on both sides of that line every day, and the gap is not subtle.
A seller in one state hands over the car and walks away clean. A seller three hundred kilometres away, across a state line, in an identical transaction, carries the liability for months or years. Same law. Same country. Two completely different deals, decided by accident of geography.
This is not an edge case in the system. It is the system. And it compounds, because used cars do not respect state borders — they move between states as they are sold and resold. A framework that breaks at every border breaks for exactly the transactions that are growing fastest.
What are the barriers to deemed ownership adoption in India?
If the design is sound and the intent is right, why has adoption been so poor? After two years inside this — talking to RTOs, state transport commissioners, MoRTH, NITI Aayog and countless advisors — I would point to five blockages. Naming them specifically matters, because vague complaints do not move policy and specific ones sometimes do.
The five specific barriers to deemed ownership adoption in India are:
Limited adoption by states: Many states, including some of the largest by vehicle ownership, have not yet adopted these rules. This means developing the SOPs for operationalising these regulations, training RTO staff to implement them and intimating other relevant authorities (municipal department, Fire services, revenue department etc.). The disproportionate registration of authorised dealers across India and their sheer absence in some states is a direct reflection of the state of adoption of this framework.
The GST prerequisite: To register as an authorised dealer, you currently need a GST registration. That sounds reasonable until you remember that most of India's used-car dealers are small and informal. The GST prerequisite excludes precisely the dealers who handle the bulk of transactions, the ones whose participation would actually move the numbers. A rule meant to formalise the market is gated by a requirement most of the market cannot meet.
No dealer-to-dealer transfer mechanism: Inter-dealer trade is routine in this business. A car passes between dealers before it reaches its final buyer. The current framework has no clean instrument for transferring deemed ownership from one authorised dealer to another, so the legal structure breaks the moment the car does the most normal thing in the trade.
Inconsistent state interpretation of the dealer's powers: States read the dealer's rights and responsibilities differently — what a deemed owner can and cannot do, how the transfer to the final buyer works, whether an OTP from the authorised dealer is sufficient. The same form means different things in different states, which is its own kind of non-recognition.
Paper-based processes: The framework was layered on top of an RTO process that still, in most places, demands physical appearances and physical documents. A digital-first reform running on a paper-first foundation inherits all the friction of the very foundation it was meant to bolster.
None of these are deep problems. They are fixable with rule clarifications, a removed prerequisite, a new transfer instrument, directives to digitise and enforce. That is the entire argument.
What changes are coming to strengthen deemed ownership?
Precision matters here more than optimism, because this is policy in mid-flight.
Over the past year, a set of recommendations on exactly these blockages — removing the GST prerequisite, creating a dealer-to-dealer transfer mechanism, clarifying the transfer process, enabling interstate generation of the relevant forms, and prescribing time-bound state adoption — has been put before MoRTH and various state governments through industry submissions, including those from Cars24. MoRTH has been engaging on it and is at an advanced stage of strengthening the framework, based on industry recommendations including ours. Those drafts will work their way toward public consultation soon.
That is the accurate claim, and not a word more. The proposed amendments are preliminary drafts moving through a very robust and deliberative process, not notified law. Anyone telling you the rules have already changed is ahead of the facts. But the direction is real, the engagement is real, and the specific fixes on the table are the right ones.
What has been missing was never a good idea. The good idea was announced in December 2022. What has been missing is uniform, time-bound, monitored adoption across every state — a directive that turns a national rule into a national reality, with deadlines and accountability, the way the Ease of Doing Business rankings turned regulatory quality from an aspiration into a competition between states.
The principle worth holding onto
There is a broader lesson here that goes beyond cars, and it is the one I would want all policymakers to take away.
A reform is not finished when it is notified. It is finished when the citizen it was written for actually experiences it. The distance between those two moments — between the gazette and the ground — is where most of the value of Indian reform is won or lost. The deemed ownership framework is a near-perfect example. A genuinely good framework, correctly designed, that has delivered almost nothing to almost everyone, because the second half of the work — adoption, digitisation, uniformity — was left undone.
We have spent years on the ground-level half ourselves, earning authorised-dealer registrations state by state, because waiting for uniform adoption was not an option for the sellers waiting on us. That work is the subject of a later piece. But the policy point stands on its own.
A reform that a third of the country's states have not switched on, and that one dealer in twenty has adopted, is not a reform. It is a rough draft. India already wrote the fix. Now it has to finish etching it into the ground.
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